Eurozone inflation posts 2.9 percent, hitting two-year low

Amid ECB concerns about inflation potentially falling below its 2 percent target
Eurozone inflation posts 2.9 percent, hitting two-year low

A month after its economy started contracting, the Eurozone is experiencing a two-year low in inflation.

According to a preliminary reading by Eurostat, price inflation in October was recorded at 2.9 percent, marking the slowest pace since July 2021. Meanwhile, the European Central Bank (ECB) expressed concerns about inflation potentially falling below its 2 percent target.

The figures indicate the challenges encountered by the eurozone, including the cost-of-living crisis and apprehensions regarding diminishing global demand in the economy.

Read more: Inflation in the 20 eurozone countries halved from October 2022

Despite overcoming the impacts of the COVID pandemic and Ukraine’s war, concerns are mounting regarding the economic consequences arising from the conflict between Israel and Hamas in the eurozone.

In the third quarter (Q3), Germany’s economy experienced a contraction of 0.1 percent, while Austria also recorded a contraction of 0.6 percent.

According to the data, France, the European Union (EU)’s second-largest economy, registered a modest growth of only 0.1 percent, whereas Italy’s economy remained stagnant in Q3.

Germany has faced significant challenges due to soaring energy costs, a decline in the manufacturing sector, and elevated interest rates implemented to curb inflation.

As per Eurostat data for October, consumer price inflation in the eurozone decelerated to 2.9 percent, marking the lowest rate since July 2021 when it stood at 2.2 percent.

Inflation is currently lower than the 4.3 percent recorded in September and falls below analysts’ predictions that it would remain above 3 percent.

Inflation is now approaching the ECB’s target of 2 percent, despite the presence of high interest rates. ECB remains steadfast in its commitment to managing and controlling inflation.

Vigilance and risk management

ECB’s Governing Council Member Ignazio Visco highlighted the need for the bank to maintain peak interest rates in the foreseeable future. He cited the lingering risks of inflation that have not yet been fully resolved. Visco also stressed the significance of remaining vigilant in order to address these risks effectively.

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